Stromburg Corporation Makes Surveillance Equipment for Intelligence Organizations

Multiple Choice

Stromburg Corporation makes surveillance equipment for intelligence organizations. Its sales are $75,000,000. Fixed costs, including research and development, are $40,000,000, while variable costs amount to 30% of sales. Stromburg plans an expansion which will generate additional fixed costs of $15,000,000, decrease variable costs to 25% of sales, and also permit sales to increase to $100,000,000. What is Stromburg's degree of operating leverage at the new projected sales level?

A) 3.7500
B) 4.5581
C) 4.3411
D) 4.1344
E) 3.9375